Summary: In a 2022 NAPEO survey, 54% of surveyed organizations said they outsourced payroll. This post covers what payroll outsourcing includes, why companies outsource payroll, and what affects the cost.
Payroll outsourcing is common among US businesses, with many companies choosing to outsource payroll to reduce administrative work and free up time for other business priorities. Managing payroll involves more than processing employee wages, with businesses also needing to stay on top of payroll taxes, deductions, records, and compliance requirements.
For small and growing businesses, these responsibilities can take valuable time away from daily operations. Outsourcing payroll gives businesses access to dedicated support while helping keep payroll processes accurate, organized, and on schedule.
At ProSourceSolutions, we ensure payroll and HR administration is made simple, giving you more time to focus on your business. Contact us today to get started.
How many businesses outsource their payroll?
According to the National Association of Professional Employer Organizations (NAPEO), more than half of US businesses outsourced payroll in 2022. Overall, it was said that 54% of surveyed organizations confirmed they outsourced payroll. The research also found that larger or growing businesses were more likely to use a PEO than smaller businesses.
This trend extends beyond the US. Payroll outsourcing is also being considered by businesses operating across multiple countries. In a 2024 ADP survey, 70% of senior payroll leaders at multinational organizations said they were considering outsourcing some payroll processes across their global operations.
For businesses that outsource at least one function, saving time and focusing on other areas of the business was the most commonly reported reason. Outsourcing routine administrative tasks such as payroll can reduce the workload on internal teams, giving business owners and employees more time to focus on customers, operations, and other priorities.
What payroll outsourcing actually means
Payroll outsourcing means handing key payroll responsibilities to an external provider instead of managing them entirely internally.
Depending on the provider and services selected, this can include:
Running payroll
Processing employee pay runs accurately and on schedule.
Tax filing
Managing payroll tax calculations, filings, and related requirements.
Payroll compliance
Helping ensure payroll processes follow applicable laws and regulations.
Why do companies outsource their payroll?
Companies outsource payroll to save time, reduce errors, and take the administrative workload off their internal teams.
Common reasons include:
- Control payroll costs
- Reduce payroll errors
- Keep up with changing tax rules
- Free owners to run the business
- Access better payroll technology
- Support employee retention
Together, these benefits can make payroll easier to manage while improving efficiency, reducing costs, and giving businesses more time to focus on their wider priorities.
How much does it cost to outsource your payroll?
The cost of outsourced payroll varies depending on the size of your workforce, payroll frequency, services included, and the pricing model used by the provider. Some providers charge a flat monthly fee, while others use a per-employee or per-pay-run pricing structure.
When comparing payroll outsourcing costs, look beyond the headline price and consider what is included, such as payroll processing, tax filing, compliance support, reporting, and payroll technology.
At ProSourceSolutions, we can help you understand your payroll outsourcing options and simplify payroll and HR administration. If you’re curious about what outsourced payroll could cost for your business, contact us today to discuss your needs and get started.
Why choose us?
If you’re considering outsourcing payroll, ProSourceSolutions can help you simplify payroll administration and manage this essential function alongside your wider HR needs.
Our team can support businesses with payroll processing, tax administration, compliance, and other HR services, giving you more time to focus on running your business.
By choosing ProSourceSolutions, you’re choosing a partner that can support your payroll and wider HR needs while helping you manage important employer obligations. Whether you’re looking to reduce administrative work, improve payroll efficiency, or simply have more time to focus on your business, we can help.
Chat with our friendly team to find out more by contacting ProSourceSolutions today.
Frequently asked questions
Why do businesses outsource payroll?
Businesses outsource payroll to save time, reduce administrative work, and access specialist support.
A payroll provider can support:
- Wage calculations
- Tax withholding
- Pay stubs
- Required reporting
This helps businesses manage complex payroll obligations without maintaining a dedicated in-house payroll team. Outsourcing can also give owners and managers more time to focus on customers, staff and business growth.
What are the benefits of outsourcing payroll?
The benefits of outsourcing payroll include saving time, improving accuracy and reducing compliance risks.
Businesses can access payroll expertise, automated systems and support with changing workplace and tax requirements. Outsourcing may also reduce the need for dedicated payroll staff and software, provide more reliable reporting, and ensure employees are paid accurately and on time.
